French VAT rises swell black market economy

Rises in the standard and reduced French VAT rates have led to an increase in cash-in-hand trading according to a university black market expert. It is believed that the undeclared economy is now worth 10.2% of the French GDP.

French VAT rise to 20% 2014

The French standard VAT rate rose to 20% from 19.6% from 1 January 2014. In addition, the 7% reduced VAT rate increased to 10%. Many labour-intensive services such as domestic cleaning have hit the 10% rate in a series of increases since 2011. This came on top of the withdrawal in January 2013 of the domestic service tax subsidy. This is believed to have pushed the amount of cash in hand work for the sector from 35% to over 45% by 2016.

It is estimated that the French black market will increase to 11.4% of the economy this year based on the VAT rises. This compares to approximately 5% in the UK, but 21% and 19% in Italy and Spain respectively.

VP Global Indirect Tax

Richard Asquith

VP Global Indirect TaxRichard Asquith

Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.